capital and net current assets

Question 1

capital

Answer 1

the amount of money put Into an enterprise by the owner to start up the enterprise so that it can begin trading

Question 2

what is the net current assets total?

Answer 2

the working capital of the enterprise once it is established

Question 3

capital:
what does an enterprise require to set their enterprise up?

Answer 3

resources

Question 4

capital:
what does the money to purchase assets usually comes from?

Answer 4

the owners funds

Question 5

capital:
what may the enterprise require?

Answer 5

additional capital in the form of a business loan

Question 6

capital:
what can be later used as capital to grow the enterprise?

Answer 6

retained profit

Question 7

what are 3 types of capital?

Answer 7

• retained profit
• business loan
• money invested in the enterprise by the owner (owner’s capital)

Question 8

how do you calculate net current assets?

Answer 8

Net current assets = Current assets - Current
labilities

Question 9

net current assets:
what must current assets always be?

Answer 9

greater than current Ilabilities

Question 10

what does it mean if the net current assets total is positive?

Answer 10

the enterprise has money to pay its short-term debts (current labilities).

Question 11

what does it mean if the net current assets total is negative?

Answer 11

the enterprise does not have the money to pay its current llabilities

Question 12

what could the negative net current assets result in?

Answer 12

financial difficulties

Question 13

factors affecting the level of net current assets:
what will the level of an enterprise’s net current assets will reflect?

Answer 13

it’s methods of doing business and what it sells

Question 14

factors affecting the level of net current assets:
what will some enterprises need to hold which will be reflected in their current assets?

Answer 14

stocks (inventory), such as finished goods or spare parts

Question 15

factors affecting the level of net current assets:
what will enterprises do that only deal in cash sales have?

Answer 15

few debtors (trade receivables), which will be reflected in their current llabilitles

Question 16

factors affecting the level of net current assets:
who does a small enterprise have to pay to straight away?

Answer 16

suppliers

Question 17

factors affecting the level of net current assets:
why does a large enterprise not have to pay to its suppliers immediately?

Answer 17

be able to negotiate favourable trade credit terms with its suppliers

Question 18

factors affecting the level of net current assets:
what does it mean if some enterprises operate in markets where there is seasonal demand for their product?

Answer 18

they purchase more stock at certain times of the year

Question 19

factors affecting the level of net current assets:
what does it reflect if some enterprises operate in markets?

Answer 19

will be reflected in the level of their current assets (stocks and debtors) and current labilitles (creditors)